CATO OP-EDS

Todd Zywicki Senator Bernie Sanders and Rep. Alexandria Ocasio-Cortez recently introduced their first joint piece of legislation — a proposal to impose a national interest-rate ceiling of 15% on all consumer credit products, from credit cards to payday loans. They promise that capping interest rates on credit cards and other consumer loans will benefit working families, but history indicates the benefit will come at the expense of everyone else — especially the half of all households who pay their balances every month. The ubiquity of general purpose credit cards (such as Visa and MasterCard) for middle-class Americans is a relatively recent phenomenon. In 1970 only 16% of American households had general purpose credit cards, and only two percent of low-income households, primarily because restrictive interest-rate ceilings made it too risky to lend to all but the wealthiest Americans. Credit card issuers offset their inability to charge a market rate of interest by imposing annual fees or bundling credit cards with other products such as checking accounts (which carried higher monthly fees in states with more restrictive usury ceilings). But consumers hate annual fees, especially those who do not carry balances but were forced to subsidize those who do. Moreover, annual fees were highly regressive, as every consumer paid the same annual card fee regardless of whether they charged $3,000 or $30,000 a year. Annual [...]
Mon, Jun 24, 2019
Source: OP-EDS
Charles Silver and David A. Hyman Among economists, it is an article of faith that competition lowers prices. But when it comes to prescription drugs, the ordinary rules do not apply. According to a new study, competition not only fails to reduce drug prices, it may drive them higher. Using data supplied by Blue Cross Blue Shield, researchers studied the prices of 49 widely used brand-name drugs over six years. They then focused on 17 drugs that had direct therapeutic equivalents—i.e., competing brand-name drugs that treat the same medical condition. For example, Humalog, Humulin, and Novolog are all forms of insulin used to treat diabetes. Competition should have caused the prices of these 17 drugs to rise more slowly than those of the remaining drugs. Competition works to lower prices in the rest of the economy, so why doesn’t it pressure pharma companies to sell brand-name drugs for less? In fact, the median prices of the 17 drugs with therapeutic equivalents grew slightly faster than those of the 32 drugs that did not face competition, although the difference was not statistically significant. Not only that, but the price hikes for the therapeutically equivalent drugs “were highly synchronized” and were “some of the largest cost increases” observed in the study. We first noticed this phenomenon—synchronized price hikes for competing drugs—when studying the prices of Viagra, Cialis [...]
Sun, Jun 23, 2019
Source: OP-EDS
Ted Galen Carpenter An increasingly popular accusation among members of the U.S. foreign-policy establishment and their allies in the news media is that Donald Trump’s administration is abandoning America’s global leadership role and placing the country into an isolationist cocoon. The latest proponent of that thesis is New York Times columnist David Brooks, who asserts flatly that “America is withdrawing from the world.” He adds that the negative results of that course “are there for all to see.” Brooks cites as examples China’s increasingly aggressive treatment of Hong Kong, a variety of Russian misdeeds, and Iran’s (but notably not Saudi Arabia’s or Israel’s) disruptive behavior in the Middle East. He contends that America’s alleged abandonment of the “liberal international order” will likely lead to even more widespread unfortunate consequences. There are several problems with the argument that Brooks and his ideological brethren are propounding. First, the concept of a liberal international order is at best aspirational and at worst fictional. The reality is that it has been little more than a convenient façade for U.S. hegemony exercised through Washington’s network of military alliances and U.S.-dominated international political and economic institutions. The United States and its allies have routinely violated the supposed norms of a rules-based international order whenever such action seemed convenient. Second, the notion that Trump’s foreign policy has been a dramatic departure from those [...]
Sun, Jun 23, 2019
Source: OP-EDS
Ilya Shapiro Thursday morning, the Supreme Court ruled 7-2 in American Legion v. American Humanist Association that a 100-year-old World War I memorial cross in Bladensburg, Maryland, doesn’t “establish” religion. That’s the correct result (read my brief for Cato), but the mish-mash of opinions—it took a paragraph to explain which justice was joining which aspect of the decision—leaves Establishment Clause jurisprudence in the muddled state it’s been for decades. That is, much like in the Ten Commandments cases of 2005, the cross here survived largely because it’s really, really old. Justice Samuel Alito, joined in full by Chief Justice John Roberts and Justices Stephen Breyer and Brett Kavanaugh, and in all but two subparts by Justice Elena Kagan—Justices Clarence Thomas and Neil Gorsuch concurred in the judgment, but wrote separately—offered four reasons for a “strong presumption of constitutionality” in favor of “retaining established, religiously expressive monuments, symbols and practices.” First, it’s “especially difficult” to identify the “original purpose or purposes” of such religiously expressive icons. Second, “as time goes by, the purposes associated with an established monument, symbol, or practice often multiply”; they may be maintained “for the sake of their historical significance or their place in a common cultural heritage.” Third, the message they convey might also change over time. Consider, for example, the Statue of Liberty, Notre Dame cathedral in Paris, many American cities with religious names [...]
Fri, Jun 21, 2019
Source: OP-EDS
Doug Bandow Sixteen years ago, the George W. Bush administration manipulated intelligence to scare the public into backing an aggressive war against Iraq. The smoking gun mushroom clouds that National Security Advisor Condoleezza Rice warned against didn’t exist, but the invasion long desired by neoconservatives and other hawks proceeded. Liberated Iraqis rejected U.S. plans to create an American puppet state on the Euphrates and the aftermath turned into a humanitarian and geopolitical catastrophe which continues to roil the Middle East. Thousands of dead Americans, tens of thousands of wounded and maimed U.S. personnel, hundreds of thousands of dead Iraqis, and millions of Iraqis displaced. There was the sectarian conflict, destruction of the historic Christian community, the creation of Al Qaeda in Iraq—which morphed into the far deadlier Islamic State—and the enhanced influence of Iran. The prime question was how could so many supposedly smart people be so stupid? Now the Trump administration appears to be following the same well-worn path. The president has fixated on Iran, tearing up the nuclear accord with Tehran and declaring economic war on it—as well as anyone dealing with Iran. He is pushing America toward war even as he insists that he wants peace. How stupid does he believe we are? Naturally, the administration blames Iran for not accepting its supposedly generous offer to talk. However, Tehran has no [...]
Fri, Jun 21, 2019
Source: OP-EDS
Diego Zuluaga It’s not entirely surprising that, so far in the short public life of Libra, the Facebook-led cryptocurrency project launched this week, the discussion has focused on the product’s potential applications and risks. “What will Mark Zuckerberg do with our money?” is the question commentators and policymakers probably wish to have answered but are too afraid to ask. Some politicians aren’t waiting for the experts to deliver their verdict. The French Finance Minister has already expressed antipathy toward what he sees as nascent competition against sovereign currencies. Top Democrats in the US Congress, meanwhile, want to impose major regulatory supervision and even a development moratorium until (in someone else’s words) “we can figure out what the hell is going on.” Keep in mind that Libra hasn’t yet launched and won’t do so before the first half of 2020. But what if we took the claims of Facebook and its Libra partners at, um, face value? By the World Bank’s reckoning, 1.7 billion adults globally remain unbanked. While this figure is rapidly shrinking, with 515 million having acquired a bank or mobile money account (such as those offered by Kenya’s M-Pesa) between 2014 and 2017 alone, there remains great untapped potential for bringing inexpensive payment services to the world’s poor, especially since many of them do own mobile phones. Warnings that Facebook wishes to supplant [...]
Fri, Jun 21, 2019
Source: OP-EDS
Doug Bandow Tensions with Iran might be rising, but American forces are already are at war in the Persian Gulf. The U.S. is backing Saudi Arabia and the United Arab Emirates in their bloody conflict against Yemen, and the Trump administration is acting as PR agent and bodyguard for the two royal families. The conflict violates American values and hurts U.S. interests. Tens of thousands of Yemeni civilians have been killed with Washington’s assistance. U.S. support for this murderous war of aggression may also be creating new terrorists who could target America in the future. Modern Yemen was born in conflict some six decades ago. The territory included an independent kingdom and British colony. For a time, Egyptian and Saudi troops backed warring Yemeni regimes. The two Yemens became one in 1990 and Ali Abdullah Saleh was elected president. Yet Saudi Arabia continued to meddle, promoting intolerant Wahhabism, which further upset Yemen’s internal balance. In 2004, Ansar Allah or Partisans of God, popularly known as the Houthis, rose against Saleh. The Houthis are dominated by Zaydi Shia (which differ theologically from Iranian Shia). When the Arab Spring washed over Yemen in 2011, Saleh was ousted. He then made common cause with his former enemies, the Houthis, and together they kicked out his successor, President Abdrabbuh Mansur Hadi, four years later. Trump needs to reverse priorities and [...]
Thu, Jun 20, 2019
Source: OP-EDS
Doug Bandow SEOUL, SOUTH KOREA — The great metropolis of Seoul sits barely thirty miles from the Demilitarized Zone. The city is the canary in the mine for the state of inter-Korean relations. All seemed well in late May as residents were frenetically active, paying little attention to events across the border in North Korea. However, those in government and the broader policy community were less certain. South Koreans should be confident about the future. Their nation is two years removed from a catastrophic political meltdown by the ruling conservatives. Transitions between the ruling and opposition parties have become routine. Although slowing, the economy remains one of the dozen largest on earth. South Korea has become a cultural as well as commercial powerhouse. Nevertheless, the country’s international situation remains unsettled. Relations with Japan are awful; those with China are a bit better but still embittered after Beijing sanctioned the Republic of Korea over its installation of America’s THAAD missile defense system. Although the Moon government officially praises relations with Washington, private assessments of President Donald Trump’s commitment to the alliance are far more negative. Then there is North Korea. One aide to President Moon Jae-in, who asked not to be identified, complained that the last two years were “like a roller coaster ride.” Expectations were high for the February Kim-Trump summit. Virtually everyone predicted that [...]
Thu, Jun 20, 2019
Source: OP-EDS
Ted Galen Carpenter A few months ago, the Trump administration and most members of America’s foreign policy community had high hopes that the fall of Venezuela’s radical left-wing government was imminent. The United States and more than 50 other countries promptly recognized Juan Guaidó, leader of the National Assembly, who claimed to be the country’s interim president, replacing Nicolas Maduro. The United States and its allies clearly assumed that the Venezuelan people would quickly dislodge Maduro from power. He was already highly unpopular due to economic mismanagement and increasingly autocratic behavior. But Maduro has not been deposed, and the Trump administration needs to reassess its policy. The anticipated uprising against Maduro failed to materialize in January as Venezuela’s military remained loyal to him, despite U.S. inducements and pressure to switch sides. Guaidó and his followers then tried to revive the rebellion’s flagging fortunes, organizing anti-regime demonstrations on April 30 and May 1. After a few days, the new offensive fizzled as well. As the summer solstice approaches, Maduro remains in power. The insurgent faction that the United States regards as Venezuela’s lawful government has yet to control any meaningful portion of the country. Guaidó himself appears to be an increasingly marginal, even pathetic figure, and the opposition to Maduro shows growing signs of disunity. U.S. leaders are reluctant to admit that [...]
Wed, Jun 19, 2019
Source: OP-EDS
Alberto Mingardi MILAN — The cleavage between the country and the city is as old as politics itself — but is particularly worrisome these days for one set of political ideas: those that aim to free markets and reduce government intervention. Last month’s European Parliament election illustrates a disquieting trend. Unsurprisingly, liberal, cosmopolitan forces did better in urban pockets (and in better-off regions in the West). More remarkably: Big-spending populists did well in rural areas (and in Eastern Europe more generally). That rural areas voted for parties promising to open the taps of public money is bad news for believers in small-government restraint. It points to the possibility that conservatives in the countryside — once the bastion of fiscal prudence — have become accustomed to assistance from the state and switched sides, offering their votes to those who irresponsibly promise to keep the cash flowing. To understand why that’s so worrying, we need to go back to the work of the Italian economist Vilfredo Pareto, a giant of the social sciences. In the 1910s, Pareto argued that people could be divided into two groups: rentiers and speculators. The first care deeply about the stability of their possessions, favor routine, save steadily and eschew debt. They are unimaginative, conservative-minded people who have a strong preference for security. The cleavage between the country and the city is as [...]
Wed, Jun 19, 2019
Source: OP-EDS

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